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Southeast Michigan mental health authorities face funding shortfall

The state’s effort to move to a new statewide Medicaid reimbursement rate for its 10 regional mental health authorities is causing budget shortfalls for three Southeast Michigan counties.

While the overall state funding for the first quarter this year was cut only 1.4 percent to $528.8 million, Wayne, Oakland and Macomb counties saw their funding cut by about 5 percent, or $48 million, for fiscal 2013-14 that began Oct. 1, the directors told Crain’s.

Meetings between the county directors and the Michigan Department of Community Health have been held the past few weeks to resolve the funding shortfall.

The directors say unless funding is restored, they will be forced to dip into financial reserves and savings. Over time, the funding cuts could lead to staff layoffs, reduced provider reimbursement and fewer services to the 88,000 Medicaid beneficiaries they serve, the directors said.

“What is being proposed by (Community Health) is not improving the system,” the county directors said in an Oct. 18 letter to Community Health Director James Haveman.

“We believe we can work together to improve the lives of the persons we serve. Therefore, we are simply asking (Community Health) to roll back these Medicaid rate changes, and give us adequate time to jointly discuss the issues noted in this letter and develop a plan for a smooth transition.”

The letter was signed by Jeff Brown, executive director of Oakland County Community Mental Health Authority; Tom Watkins, CEO of Detroit Wayne Mental Health Authority; and John Kinch, executive director of Macomb County Community Mental Health Authority.

How it began

As part of a 2010 plan to phase in an average statewide Medicaid payment, Community Health began to slowly reduce funding to the mental health regions, said Lynda Zeller, Community Health’s deputy director of behavioral health and developmental disabilities administration.

“There has been criticism for a long time that rates are not equitable (for all regions in Michigan) and do not allow equitable access” for all eligible beneficiaries, Zeller said. “This is a priority for legislators and for (the Snyder) administration.”

Over the past four years, the Oakland County mental health authority's Medicaid budget has been cut by 20 percent while patients served has increased, said Ronald Hocking, the authority’s director of network cost and utilization. About half the health authorities in Michigan have experienced similar cuts.

“The state committed to evaluating the impact to the system (by moving to a statewide average), but they have never done it,” Hocking said.

To administer Medicaid mental health funds, Michigan and 19 other states created Prepaid Insurance Health Plans in 1998 to manage enrollees. There are now 10 PIHPs in Michigan, each managed by a county mental health authority.

'No time to plan'

In late September, Brown said the Southeast Michigan mental health authorities were told by Community Health their budgets would be cut.

"We were told of the funding reduction three days before our fiscal year started,” Brown said. “Our budgets were in place. We had no time to plan.”

The Oakland County mental health authority’s Medicaid budget was cut by 6.4 percent, or $14 million, for its 22,000 beneficiaries, Brown said. Wayne and Macomb received similar budget cuts.

Overall, Community Health’s Zeller said five regional authorities received increases, and five had their budgets cut.

Brown said the three SE Michigan mental health authorities, which are among the largest in the state, still have not been told why the cuts were made days before their 2014 fiscal years began.

Zeller said Community Health tried to get rate letters out sooner to the health authorities, but the actuarial analysis took time to complete.

Zeller said the three county health authorities of Oakland, Wayne and Macomb have $108 million total in reserve accounts that can be used to offset state funding decreases this year.

“Oakland has an additional $27.6 million in general fund balance” that also can be used to offset rate reductions, Zeller said.

Willie Brooks, CFO of the Oakland County mental health authority, said the authorities use the reserves and savings to meet unexpected expenses and organizational transformation to meet changes under the Affordable Care Act.

“We can’t use our reserves to maintain a budget,” Brooks said.

Brooks said Oakland always has been paid a higher rate than other counties because it has a disproportionate number of patients with developmental disabilities.

But Zeller said Oakland’s rate-setting included adjustments for historical costs that included caring for more costly developmentally disabled people.

Brown said he doesn’t expect any changes in the funding formula until fiscal 2015. He said Community Health has created a workgroup of the 10 PIHPs to revisit the rate formulas.

Zeller said the workgroup will address concerns raised by some of the authorities.

So far, Brown said no employees have been laid off from its 85-employee workforce as the authority seeks to cut $500,000 from its administrative budget. He said the authority’s goal is to reduce internal costs and reduce staff through attrition.

“We have told our core providers to look for efficiencies. … There could be some cuts after April 1. We have enough reserves (and savings) for 2014, but nothing for 2015,” Brooks said.